yelp q4 2015 investor presentation
TRANSCRIPT
Investor PresentationQ4 2015
Safe HarborFORWARD-LOOKING STATEMENTS
These slides and the accompanying oral presentation contain forward-looking statements. All statements other than statements of historical factscontained in these slides and the accompanying oral presentation, including statements regarding Yelp Inc.’s (“Yelp” or the “Company”) futureoperations, expected financial results and future financial position, future revenue, long-term target margins, projected growth and expenses, trends,opportunities, prospects, estimates and plans and objectives of management are forward-looking statements. In some cases, you can identifyforward-looking statements by terms such as “believe,” “may,” “will,” “estimate,” “forecast,” “guidance,” “continue,” “anticipate,” “intend,”“could,” “would,” “project,” “plan,” “potential,” “target,” “opportunity,” ”model,” “expect” or the negative or plural of these words or similarexpressions. The Company has based these forward-looking statements largely on its estimates of its financial results and its current expectationsand projections about future events and financial trends that it believes may affect its financial condition, results of operations, business strategy,short-term and long-term businessoperations and objectivesand financialneeds.
These forward looking statements are subject to a number of risks, uncertainties and assumptions, including the fact that we have a limited operatinghistory in an evolving and competitive industry, that our growth rate may not be sustainable, that we rely on traffic to our website from searchengines like Google and Bing, our ability to generate sufficient revenue regain profitability, particularly in light of our significant ongoing sales andmarketing expenses, our ability to attract, retain and motivate well-qualified employees, particularly in sales and marketing, the impact of phasingout our brand advertising products, our ability to generate and maintain sufficient high quality content from our users, our ability to maintain a strongbrand and manage negative publicity that may arise, our ability to manage acquisitions of new businesses, solutions and technologies and tointegrate those businesses, solutions or technologies, the efficacy of our automated recommendation software, our ability to maintain and expandour base of advertisers, our ability to develop our communities effectively, our ability to deal with an increasingly competitive local searchenvironment, our ability to timely upgrade and develop our systems and infrastructure and changes in political, business and economicconditions. These risks and uncertainties may also include those described in the Company's most recent Form 10-Q or 10-K filed with the Securitiesand Exchange Commission.
New risks emerge from time to time. It is not possible for Company management to predict all risks, nor can the Company assess the impact of allfactors on its business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those containedin any forward-looking statements the Company may make. In light of these risks, uncertainties and assumptions, the forward-looking events andcircumstances discussed in these slides and the accompanying oral presentation may not occur and actual results could differ materially andadversely from those anticipated or implied in the forward-looking statements. You should not rely upon forward-looking statements as predictionsof future events. Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Companycannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements willbe achieved or occur. Moreover, neither the Company nor any other person assumes responsibility for the accuracy and completeness of theforward-looking statements. Any forward-looking statement speaks only as of its date. Except as required by law, the Company undertakes noobligation to update publicly any forward-looking statements for any reason after the date of this presentation, to conform these statements toactual results or to changes in the Company’sexpectations.
2
Connecting people with great local businesses
3
Strong execution in four years since IPO
Note: Financials and metrics at IPO are as of Q4’11(1) See slide 23 for reconciliation to GAAP net income (loss) for the periods presented and for information about the limitations of adjusted EBITDA as an analytical tool.(2) Number of unique devices accessing the app on a monthly average basis for the period indicated, according to internal Yelp logs.(3) Number of “users,” as measured by Google Analytics, accessing Yelp via the Yelp website (including mobile web) on a monthly average basis for the period indicated.(4) Cumulative number of reviews since inception, including reviews that had been removed or were not recommended, as of the date indicated.
$24.9 $153.7 517%
($0.0) $17.5 -
-0.1% 11.4% -
5.7 20.0 251%
65.8 140.5 114%
24.8 95.2 284%
606 2,648 337%
18.8 111.0 490%
450 2,200 389%
Q4 2015
4
1
2
3
4
Large market opportunity
20+ million Local business locations
in the U.S.
$151 billionU.S. local ad spend
(projected 2016)
Direct Mail$42B
Newspapers$20B
TV$22B
Radio$18B
Yellow Pages$7B
OOH$9B
Cable$8B
Magazine$3B
Online*$19B
Mobile$4B
Sources: BIA Kelsey, U.S. Census Bureau*Pure-play Online and Email, Reputation and Presence Management
5
The industry is shifting online
6
Leading local guide with plenty of room for growth
0%
5%
10%
15%
20%
25%
30%
Yelp
Grou
pon
Trip
Advis
or
YP Si
tes
Four
Squa
re
Angi
e's Li
st
1 As defined by penetration of U.S. smartphones. Source: ComScore, December 2015, Mobile Media Metrix, Browsing + Application Data
Mobile reach1
7
Our high-quality content continues to grow
(mm) Cumulative reviews
-10 20 30 40 50 60 70 80 90
100
12/1
1
6/12
12/1
2
6/13
12/1
3
6/14
12/1
4
6/15
12/1
5
8
Strong app growth drives engagement
Q4'14 Q4'15
20M
App unique devices*
15M
38%y/y
* Number of unique devices accessing the app on a monthly average basis for the period indicated, according to internal Yelp logs.Note: Page views include business listing pages, business photo pages and search listings 9
App users view more than
as many pages as website users
Local advertising products
Local search ads~$50 - $1,000 monthly budget
CPC: $1 - $20+Enhanced profile with video
~$50 - $100 a month
10
Compelling ROI for local advertisers
$0
$200
$400
$600
$800
$1,000
$1,200Estimated average monthly ad performance
$267
269% ROI
$983
Note: Analysis conducted for the month of Sept 2014. Advertisers include single location local businesses that purchased local search ads (ad spend does not include Enhanced Profile features). Estimated Revenue is (leads from ad clicks) x (average revenue per customer as estimated by the Boston Consulting Group, survey conducted Nov 2012). 11
Average monthly spend on CPC or CPM ads
Estimated monthly revenue from ad-driven leads
Local advertising revenue growth drivers
12
Strong unit economics
0%
20%
40%
60%
80%
100%
Year 1 Year 2 Year 3
Contribution margin of an average local advertiser
Note: Data based on internal analysis conducted in June 2015. Revenue is based on average advertising spend for single-location CPM advertisers, average revenue retention and advertising contract term length. Customer acquisition costs include direct sales, marketing, credit card transaction fees and support costs and are based on the average productivity of a salesperson.
48%
95% 95%
13
Strong financial performance
-$100
$0
$100
$200
$300
$400
$500
$600
$700
$800
2009 2010 2011 2012 2013 2014 2015 2016E
AdjustedEBITDA NetRevenue
$26$5
$29$71$83
$138
$233
$378
($1) ($6)$48
($1)
$550
$69
14
(mm)
See slide 24 for reconciliation to GAAP net income (loss) for the periods presented and for information about the limitations of adjusted EBITDA as an analytical tool.
$685-$700
$90-$105
Long-term target model
7.2% 7.1% 6.5% 9.3% 7%-8%
62.5% 56.6% 53.3% 54.9% 43%-44%
14.9% 16.4% 17.3% 19.6% 12%-14%
22.9% 18.4% 15.4% 14.7% 8%-11%
5.3% 4.9% 4.7% 5.4% ~4%
3.3% 12.6% 18.8% 12.6% 35%-40%
FY2012 FY2013 FY2014 FY2015 LT Targets
Stock based comp included in each line item except for adjusted EBITDA
(as a percentage of revenue)
See slide 24 for reconciliation to GAAP net income (loss) for the periods presented and for information about the limitations of adjusted EBITDA as an analytical tool.
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Eat24: Another way for consumers to connect with local businesses online
$0$5
$10$15$20$25$30$35$40$45
2013 2014 2015
Annual Eat24 revenue(mm)
16
SeatMe: intuitive and affordable cloud-based online reservations solution
*The number of restaurants accepting reservations via SeatMe and Yelp Reservations, as of 12/31/15. Note: SeatMe paying accounts does not include restaurants accepting reservations via Yelp Reservations, Yelp’s free and lightweight reservations solution that was launched in May 2014.
0
500
1,000
1,500
2,000
2,500
3,000
2013
2014
2015
SeatMe paying accounts
17
~20,000 restaurants using SeatMe and Yelp Reservations*
1
10
100
1000
– 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0 11.0 12.0
Growth in reviews
Years since CM Start
InternationalU.S.
bubble size = adult metro population
International: content continues to grow globallylog
scale
Note: Includes integrated Cityvox and Restaurant-Kritik reviews; growth in reviews and years since CM start updated as of 12/31/15Source: N. and S. American, Asian and Australian city populations taken from government census data; European city populations taken from Eurostat.
18
Review growth relative to community manager start
Investment highlights
Large addressable market opportunity
High-quality user-generated content is competitive advantage
Recurring revenue base drives operating leverage
Strong balance sheet and cash flow
19
Appendix
20
Quarterly revenue
$46$55 $61
$71 $76$89
$102$110
$119$134
$144$154
$0
$20
$40
$60
$80
$100
$120
$140
$160
$180Q1
'13
Q2'13
Q3'13
Q4'13
Q1'14
Q2'14
Q3'14
Q4'14
Q1'15
Q2'15
Q3'15
Q4'15
(mm)
21
Quarterly adjusted EBITDA
$3
$8 $8$10 $9
$17
$20
$25
$16
$23
$13
$18
$0
$5
$10
$15
$20
$25
$30Q1
'13
Q2'13
Q3'13
Q4'13
Q1'14
Q2'14
Q3'14
Q4'14
Q1'15
Q2'15
Q3'15
Q4'15
See slide 23 for reconciliation to GAAP net income (loss) for the periods presented and for information about the limitations of adjusted EBITDA as an analytical tool. 22
(mm)
Quarterly Adjusted EBITDA reconciliation
($mm) Q4'11 Q1'12 Q2'12 Q3'12 Q4'12 Q1'13 Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1’15 Q2’15 Q3’15 Q4’15
Adjusted EBITDA Bridge
Net Income / (Loss) ($9.0) ($9.8) ($2.0) ($2.0) ($5.3) ($4.8) ($0.9) ($2.3) ($2.1) ($2.6) $2.7 $3.6 $32.7 ($1.3) ($1.3) ($8.1) ($22.2)
+ Tax & Other Expenses 0.3 0.1 0.1 0.1 0.2 0.2 0.3 0.5 0.2 (2.0) 0.4 0.9 (24.7) (3.0) 1.4 (2.6) 15.8
+ Depreciation & Amortization 1.4 1.4 1.7 1.8 2.4 2.5 2.6 2.8 3.5 3.7 4.0 4.6 5.3 6.9 7.2 7.6 8.0
+ Stock Based Compensation* 1.4 7.4 1.9 2.3 3.3 4.6 5.7 7.0 8.8 9.5 10.1 10.9 11.8 13.7 15.5 15.7 16.0
+ Contribution to The Yelp Foundation 5.9 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
+ Restructuring & Integration 0.0 0.0 0.0 0.0 1.3 0.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Adjusted EBITDA ($0.0) ($1.0) $1.6 $2.2 $1.8 $3.2 $7.8 $8.1 $10.4 $8.5 $17.2 $20.1 $25.1 $16.3 $22.7 $12.5 $17.5
* Stock-based compensation for the twelve months ended December 31, 2013 excludes approximately $0.6 million of stock-based compensation already included in restructuring and integration costs.
This presentation includes adjusted EBITDA, a non-GAAP financial measure that Yelp uses to evaluate its business. Yelp includes adjusted EBITDA because it is a key measure used by Yelp’s management and board of directors to understand and evaluate core operating performance and trends, to prepare and approve its annual budget and to develop short- and long-term operational plans. In particular, the exclusion of certain expenses in calculating adjusted EBITDA can provide a useful measure for period-to-period comparisons of Yelp’s core business. Accordingly, Yelp believes that adjusted EBITDA provides useful information to investors and others in understanding and evaluating Yelp’s operating results in the same manner as its management and board of directors. Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of Yelp’s results as reported under GAAP. You can read more about the limitations of adjusted EBITDA in Yelp’s most recent Annual Report on Form 10-K or Quarterly Report on Form 10-Q at www.yelp-ir.com or the SEC’s website at www.sec.gov. Because of these limitations, you should consider adjusted EBITDA alongside other financial performance measures, including various cash flow metrics, net income (loss) and Yelp’s other GAAP results.
Additionally, Yelp has not reconciled its adjusted EBITDA outlook for the first quarter and full year 2016 to its net income (loss) outlook because it does not provide an outlook for other income (expense) and provision for income taxes, which are reconciling items between net income (loss) and adjusted EBITDA. As items that impact net income (loss) are out of Yelp’s control and cannot be reasonably predicted, Yelp is unable to provide such an outlook. Accordingly, reconciliation to net income (loss) outlook for the first quarter and full year 2016 is not available without unreasonable effort. 23
Annual Adjusted EBITDA reconciliation
($mm) 2009 2010 2011 2012 2013 2014 2015Adjusted EBITDA Bridge
Net Income / (Loss) ($2.3) ($9.6) ($16.7) ($19.1) ($10.1) $36.5 ($32.9)
+ Tax & Other Expenses (0.0) 0.1 0.5 0.3 1.2 (25.4) 11.6
+ Depreciation & Amortization 1.2 2.3 4.2 7.2 11.5 17.6 29.6
+ Stock Based Compensation* 0.6 1.4 4.9 14.9 26.1 42.3 60.8
+ Restructuring & Integration 0.0 0.0 0.0 1.3 0.7 0.0 0.0
+ Contribution to The Yelp Foundation 0.0 0.0 5.9 0.0 0.0 0.0 0.0
Adjusted EBITDA ($0.6) ($5.7) ($1.1) $4.6 $29.4 $70.9 $69.1
* Stock-based compensation for the twelve months ended December 31, 2013 excludes approximately $0.6 million of stock-based compensation already included in restructuring and integration costs.
24
This presentation includes adjusted EBITDA, a non-GAAP financial measure that Yelp uses to evaluate its business. Yelp includes adjusted EBITDA because it is a key measure used by Yelp’s management and board of directors to understand and evaluate core operating performance and trends, to prepare and approve its annual budget and to develop short- and long-term operational plans. In particular, the exclusion of certain expenses in calculating adjusted EBITDA can provide a useful measure for period-to-period comparisons of Yelp’s core business. Accordingly, Yelp believes that adjusted EBITDA provides useful information to investors and others in understanding and evaluating Yelp’s operating results in the same manner as its management and board of directors. Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of Yelp’s results as reported under GAAP. You can read more about the limitations of adjusted EBITDA in Yelp’s most recent Annual Report on Form 10-K or Quarterly Report on Form 10-Q at www.yelp-ir.com or the SEC’s website at www.sec.gov. Because of these limitations, you should consider adjusted EBITDA alongside other financial performance measures, including various cash flow metrics, net income (loss) and Yelp’s other GAAP results.
Additionally, Yelp has not reconciled its adjusted EBITDA outlook for the first quarter and full year 2016 to its net income (loss) outlook because it does not provide an outlook for other income (expense) and provision for income taxes, which are reconciling items between net income (loss) and adjusted EBITDA. As items that impact net income (loss) are out of Yelp’s control and cannot be reasonably predicted, Yelp is unable to provide such an outlook. Accordingly, reconciliation to net income (loss) outlook for the first quarter and full year 2016 is not available without unreasonable effort.
Cohort analysis – local revenue
U.S. Cohort
Number ofYelp Communities
(1)
AverageCumulative
ReviewsAs of December 31,
2015 (2)
Year-Over-YearGrowth inAverage
CumulativeReviews (3)
Average Local Advertising
Revenue Q4 2015 (4)
Year-Over-YearGrowth in
Average LocalAdvertisingRevenue (5)
2005 – 2006 Cohort 6 6,071 28% $8,476 30%
2007 – 2008 Cohort 14 1,353 32% $2,431 35%
2009 – 2010 Cohort 18 479 39% $655 39%
(1) A Yelp community is defined as a city or region in which we have hired a Community Manager. (2) Average cumulative reviews is defined as the total cumulative reviews for businesses in the cohort as of December 31, 2015 (in thousands) divided by the number of communities in the cohort.(3) Year-over-year growth in average cumulative reviews compares the average cumulative reviews as of December 31, 2015 with that of December 31, 2014.
(4) Average local advertising revenue is defined as the total local advertising revenue from businesses in the cohort over the three-month period ended December 31, 2015 (in thousands) divided by the number of communities in the cohort.(5) Year-over-year growth in average local advertising revenue compares the average local advertising revenue in the three-month period ended December 31, 2015 with that of the same period in 2014.
25
Philadelphia case study
Reviews by Metro / Philadelphia (Cumulative)
Thousands Revenue(in thousands)
$6,000
$4,000
$2,000
$0
Content and traffic build Monetization begins
20132006 2007 2008 2009 2010 2011 2012 20152014
26
Emphasizing transactions in search
27
Auto-categorization of photos
28
Request a quote
29Note: For Illustrative purposes only
Business owner’s dashboard
Note: For Illustrative purposes only30
Revenue estimate tool
Note: For Illustrative purposes only31
Ad Dashboard (in Beta)
32Note: For Illustrative purposes only
Activity feed
33Note: For Illustrative purposes only
Wide breadth of business categories
Travel & Hotel4%
Nightlife4%
Auto4%
Health6%
Beauty & Fitness9% Home & Local Services
12%
Restaurants19%
Shopping23%
Other12%
Arts, Entertainment & Events7%
Distribution of reviewed businesses
Note: As of December 31, 2015; Includes some businesses that have only received reviews that have been removed or not recommended34
Yelp’s geographic footprint
As of Dec 31, 2015= countries with a Yelp presence
35